Senate to vote on Internet sales tax bill

The Senate is set to vote on an Internet sales tax bill within the first week of May.

Also known as the Marketplace Fairness Act, the bill gives states the authority to require online sellers to collect sales tax at the point of purchase. There is an exception for small businesses that record less than $1 million in gross sales each year.

Right now, states can only collect sales tax if a retailer has a physical location in the state.

Proponents of the bill say that the tax is not a new one since consumers in many states, including Virginia, are required to report online purchases as part of the "consumer use tax" on their year-end tax returns. The law, however, has been largely unenforceable.

According to the proposed law, sales tax would be calculated based on the delivery address.

The ability to require online sellers to collect the tax will level the playing field for small businesses, supporters of the bill say.

"As a small, independently-owned brick-and-mortar retailer and e-tailer, I fully support the Marketplace Fairness Act, which would close a sales tax loophole that pre-dates the Internet," says Jennifer Raines, owner of Quirks of Art, a boutique in Williamsburg. "Online giants, like eBay, have exploited this loophole for years. I hope the U.S. Senate stands up for the small businesses across the country who are the economic engines that fuel our local communities."

The Hampton Roads Retail Alliance and Virginia Retail Federation cite similar reasons for support of the bill.

Joel Canepa, owner of Crazy J's Consignments in Hayes, says there should not be an exception for small businesses, but that the law is largely unenforceable anyway.

"Enforcement will be next to impossible what with eBay, paypal, and other online payment methods," he says. "The cost to have oversight and enforcement of such a project would probably far outweigh the income derived from those that actually comply."

The bill requires states to provide Internet sellers with software that will calculate state sales tax rates.

"The requirements of this legislation would not create an undue burden on online retailers because the bill requires states to provide the software to calculate what state sales or use taxes must be remitted," Rep. Robert "Bobby" Scott (D) said in a written statement. "There are also services available that will distribute the taxes to the various states for the business."

Sen. Tim Kaine (D) also says that he will support the bill when it comes to the scheduled May 6 vote, which was informally approved during an unofficial Senate vote in April.

Rep. Rob Wittman (R) only committed to "monitor the legislation" as it moves forward.

Internet giant Amazon.com, which worked to stall similar movements in past years, has said it is in favor of the bill. Amazon now pays state sales tax in eight states, and is scheduled to begin collecting sales tax from Virginia shoppers in September. An additional five states already have agreements to collect sales taxes from Amazon in the future.

Ebay.com is one of the largest online retailers opposed to the bill saying it aims to treat small businesses like online giants.

"If Congress passes online sales tax legislation, small businesses with less than 50 employees or less than $10 million in annual out-of-state sales should be exempt from the burden of collecting sales taxes nationwide," a written statement by the company says.

For many shoppers, taxing online sales seems inevitable.

"I think it's fair, and the states need the revenue," says Martha Grondin, of Newport News.

In 2012, total e-commerce sales jumped by nearly 16 percent over 2011 sales to $225.5 billion, while retail sales as a whole only increased by 5 percent, according to the Department of Commerce.

Contact your legislator

If you would like to contact your legislator to comment on the proposed Marketplace Fairness Act, here is their information. The Senate vote is scheduled to take place on May 6.